TaxTMI 
TaxTMI 
2011 (8) TMI 329
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....erged with Saurer India Pvt. Ltd. with effect from 1-1-2004) ('SMCL' or 'the appellant') was incorporated in 1993, for providing sales and support services, for highly sophisticated textile machinery manufactured by W. Schlafhorst AG & Co., Germany ("WSC"). It also provides technical services to customers in and outside India of its Associated Enterprise ('AE') namely WSC and to third party customers in India. The services are rendered mainly in respect of machineries sold by WSC to its customers. WSC manufactures only two types of machines namely, Autocoro welding machinery and Autocoro (Rotor machinery). The appellant had international transactions as defined in section 92B of the Act with its associated enterprises for the concerned previous year. The said international transactions were duly reported in the Accountant's report in Form No. 3CEB filed along with the return of income. In order to determine the Arm's Length Price for the said international transactions, a reference was made under section 92CA(1) by the ACIT, Range-5(3), Mumbai, to the Addl. CIT (TP-IV), Mumbai (TPO). The International transactions entered into by the appellant,....
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.... November 2006, passed under section 92CA(3) of the Act, rejected all the third party comparable identified by the assessee except M/s. Vimta Labs. In this year, the TPO rejected L&T Sergeant Lundy Ltd. as a comparable case by observing that the company is engaged in construction activities and also carries on business of providing engineering and associated services for Thermal, Hydro and combine cycle purchase. Hence, in terms of function performed, this company is not comparable to the assessee. The TPO in this year accepted M/s. Vimta Labs, as the comparable by observing that the company is engaged in contract research services which is akin to technical support services and is found to be closely comparable and, hence, accepted. We have to mention that for the assessment year 2003-04, L&T had operating profits to cost at 52 per cent whereas for assessment year 2004-05, the figure was (-) 11.97 per cent. In the case of M/s. Vimta Labs., for the assessment year 2003-04, the operating profit of cost was 29 per cent and whereas for assessment year 2004-05, the figure was 61.4 per cent. In the assessment year 2004-05, the TPO suggested on adjustment of Rs. 58,80,625, by applying th....
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....(Appeals), in his order at Page-2, has enumerated the nature of services and that a perusal of the same demonstrates that the assessee provided different types of services. If the services rendered to the A.E. are much costlier than the services rendered directly to the third party, no customer would approach the A.E., as it would be a bad business decision. Hence, the internal comparable is rightly rejected; (b) the billing is based on time sheet, a copy of which is available at Page-51 of assessee's paper book and this time sheet categorises services into five different types; (c) The TPO, for the assessment year 2003-04, has rightly rejected each of the comparable and selected L&T as the only comparable company for the purpose of benchmarking and this analysis should be accepted. 9. Learned Counsel, Mr. Kanchan Kaushal, appearing on behalf of the assessee, submits that the transfer pricing study, vide Para-5.66 / Page-54, was not properly and completely read by the learned Departmental Representative, which is leading to wrong interpretation - (i) that the Transfer Pricing study has clearly stated that if CUP method is adopted, then the standard of comparability ....
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....ter-sale-services. The undisputed fact is that the assessee charges technical services fee on the basis of per engineer per day. The rate for services in India as well as for services in Bangladesh and Sri Lanka, which are being done no behalf of the principal is Rs. 3,200 per engineer per day. In contrast for similar services rendered in other countries, the rate charged is Rs. 4,300 per engineer per day. The assessee also offers after-sales-service to the third party customer directly and in such cases, charges them at the rate of Rs. 1,650 per engineer per day. 14. Coming to the nature of services, from time sheet, which is at Page-51 of the paper book, it can be seen that these are - (i) new erection; (ii) machinery re-location/dismantling; (iii) Upgrade/conversion, overhaul repairs; (iv) repairs and services on electric equipment. Though the nature of services do vary, the fact remains that they broadly fall under a common category of installation services, warranty services and after-sales-services. In our opinion, the nature of services does not vary significantly. It is not also in dispute that the same engineers are deputed for all these services and the ....